2026-05-16 22:03:10
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Today at a glance:
🛢️ Aramco: Pipeline Holds the Line
📱 Tencent: AI Catch-Up Cost
🌐 Cisco: AI Orders Nearly Double
⚙️ Applied Materials: AI Tailwind Accelerates
🏦 Nubank: Credit Costs Bite
🚚 JD.com: Food Delivery Losses Narrow
🪙 Circle: Arc Steals the Show
🧊 Dynatrace: ARR Crosses $2 Billion
👟 On: Premium Strategy Compounds
🎨 Figma: AI Monetization Lands
💊 Hims & Hers: GLP-1 Comedown
🛍️ Global-e: AI-First Margin Lift
💳 Klarna: Profit Pivot Lands
📆 Monday.com: AI Pricing Pivot
🌎 DLocal: Volume Outpaces Margin
With Brent hovering near $100, the Strait of Hormuz still effectively closed, and nearly a billion barrels of regional supply already lost to the blockade, Aramco's Q1 print landed in the middle of the most disruptive oil supply shock in decades.
Q1 adjusted net income jumped 26% Y/Y to $33.6 billion ($2.4 billion ahead of consensus) on revenue of $115.5 billion (+7% Y/Y). Aramco's realized crude price climbed to $76.90/bbl from $64.10 in Q4, with Brent rising 95% over the quarter. The $21.9 billion quarterly dividend held — but free cash flow of $18.6 billion came in below the payout for the first time in years, dragged by a $15.8 billion working-capital build tied to crisis-driven inventory and logistics shifts.
The story remains the East-West pipeline, which hit its full 7 million bpd capacity in Q1. CEO Amin Nasser called it a “critical supply artery.” Crude sales volume rose Y/Y but fell sequentially, reflecting the loss of Strait of Hormuz throughput. CapEx of $12.1 billion supports the ongoing $50-55 billion FY26 spending plan. Gearing rose to 4.8% from 3.8% at year-end as the dividend exceeded free cash flow.
Nasser gave a stark warning. If Strait of Hormuz traffic resumes today, oil markets will need a few months to rebalance — but if the disruption persists beyond a few more weeks, the market won’t normalize until 2027. The question for the coming months is whether Hormuz traffic recovers enough to ease working-capital pressure, and whether Aramco can keep crude flowing at pipeline capacity without compromising the dividend if free cash flow continues to run below the $21.9 billion payout.
Tencent Q1 revenue rose 9% Y/Y to 196.5 billion yuan (~$29 billion) — its slowest pace in six quarters and a miss versus the 199 billion yuan consensus. Net profit climbed 21% to 59.4 billion yuan, beating expectations. The revenue miss was partly due to a later Lunar New Year, shifting some gaming revenue to Q2. Shares are down over 20% YTD as investors weigh whether Tencent can monetize AI fast enough.
Gaming grew 8%. Domestic gaming grew just 6% on the holiday shift, while International gaming rose 13%, boosted by League of Legends, Wuthering Waves, and Brawl Stars.
Marketing services surged 20% (accelerating from 17% last quarter), the clear bright spot, driven by an upgraded AI-driven ad recommendation model.
FinTech and Business Services rose 9%. Tencent Cloud’s international business (part of this segment) grew over 40%.
Social Networks declined by 2%, primarily due to the later timing of the Spring Festival. Wexin and WeChat now have a combined 1.43 billion Monthly Active Users (MAUs).
Capex jumped 63% sequentially to 31.9 billion yuan (~$4.4 billion), with management pledging “a substantial increase” in H2 as China-designed AI chips become available. CEO Pony Ma candidly explained: “A year ago we thought we were on the boat, then we found it was leaking” — a rare acknowledgment that Tencent is playing catch-up.
The Hy3 preview model launched in April climbed to the top of OpenRouter’s token-usage leaderboard, with WorkBuddy now positioned as China’s most widely used productivity AI agent. Tencent confirmed it’s working to integrate agents into WeChat’s mini-program ecosystem, but gave no timeline. Tencent’s 36 billion yuan ($5 billion) AI spend in 2026 remains conservative versus the $700+ billion combined US hyperscaler budget. The next question is whether agentic AI integration into WeChat starts generating measurable engagement before competitors like ByteDance and Alibaba lock in distribution.
2026-05-15 20:03:02
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This week, Alibaba and Sea Limited reminded investors what that looks like.
Both missed profit expectations. Both stocks rallied anyway.
That’s the paradox of an investment cycle. The income statement gets worse before the underlying business gets better. Alibaba is pouring money into AI infrastructure. Sea is spending to widen its e-commerce moat.
To be sure, the bar was very low. After all, these two stocks have been down in the past five years, while the S&P 500 has nearly doubled.
But investors may forgive ugly earnings today if the spending creates better earnings tomorrow. The question is whether these companies are building moats or just burning cash.
Today at a glance:
🐉 Alibaba: The AI Trade-Off
🌊 Sea Limited: Moat Over Margins
Alibaba just delivered one of the strangest earnings reactions of the season.
Revenue grew only 3% Y/Y to $35.3 billion ($1.1 billion miss), while adjusted EBITA fell 84% to $0.7 billion. The company turned to an operating loss for the first time in five years.
And yet, the stock jumped 8%. Why? Because investors looked past the income statement and focused on the AI trajectory.
CEO Eddie Wu said Alibaba’s AI work has moved from “incubation to commercialization at scale.” The company now expects to spend even more than its previous $52 billion three-year AI investment plan, with management prioritizing growth and market share over near-term margins.
In short, Alibaba traded profit for AI growth.
Revenue breakdown:
🛒 China E-commerce: $17.7 billion, up 6%.
☁️ Cloud Intelligence: $6.0 billion, up 38%.
🌍 International commerce: $5.1 billion, up 6%.
🧩 All others: $9.6 billion, down 21%, distorted by disposals.
Excluding disposed businesses such as Sun Art and Intime, group revenue actually grew 11% Y/Y.
The main problem was profitability. Group operating margin turned slightly negative. Adjusted EBITA margin dropped to 2% from 14%. Sales and marketing expenses rose to 22% of revenue as Alibaba funded subsidies for quick commerce and user acquisition for the Qwen AI model family. Free cash flow swung to a $6.8 billion outflow as AI infrastructure spending ramped up.
Alibaba is no longer managing the business for clean quarterly margins. It is managing for a strategic position.
Management expects Cloud Intelligence’s external growth to keep accelerating beyond +40%. Annual recurring revenue from AI models and applications is expected to surpass 30 billion yuan (~$4.4 billion) by year-end. CapEx will rise from already elevated levels, as management warned of much higher-than-expected AI spending.
Cloud Intelligence was the bright spot thanks to AI.
Revenue grew 38% Y/Y to $6 billion, while external cloud revenue accelerated to 40% growth. AI-related product revenue grew triple digits for the 11th consecutive quarter and now accounts for 30% of external cloud revenue. Alibaba expects that mix to exceed 50% within about a year.
That matters because Cloud is the business that can change Alibaba’s multiple. The core marketplace is mature, quick commerce is expensive, and international commerce remains competitive. But if Cloud keeps accelerating with AI demand, Alibaba starts to look less like a slow-growth e-commerce giant and more like China’s AI infrastructure champion.
Wu’s key point is that AI tokens are becoming a production input, not just another line in the IT budget. If companies use AI to run workflows, serve customers, build software, and automate operations, demand scales with business activity.
That is the bull case for Alibaba Cloud.
China E-commerce reported revenue growth of 6% Y/Y, but the underlying marketplace looked healthier than the headline suggests.
Customer management revenue grew only 1% on paper, but that was distorted by an accounting change in how Alibaba records merchant subsidies. On a like-for-like basis, management says it grew 8%, though still increasingly supported by subsidies.
The pressure came from quick commerce. Taobao Instant Commerce is Alibaba’s push into food, grocery, and local delivery. It gives Alibaba another way to increase frequency and defend the customer relationship against Meituan, JD.com, PDD, and Douyin.
But it is expensive. China E-commerce adjusted EBITA fell sharply as Alibaba subsidized users and merchants. Management says the unit economics are improving and expects quick commerce to turn profitable on a per-order basis by FY27.
So the e-commerce story is a trade-off: Alibaba is using today’s profits to defend tomorrow’s traffic.
The most interesting long-term move is Qwen.
Alibaba is integrating Qwen into its broader ecosystem, including e-commerce experiences such as shopping assistance. That gives Alibaba something most AI companies would love to have: distribution.
A standalone chatbot has to acquire users from scratch. Alibaba can put Qwen in front of hundreds of millions of shoppers, merchants, and cloud customers.
That does not guarantee adoption. Consumer AI habits are still forming, and ByteDance, Tencent, Baidu, and other Chinese platforms are all fighting for the same user behavior.
But the strategic logic is clear: Alibaba wants AI to connect the full stack:
Models through Qwen.
Infrastructure through Alibaba Cloud.
Applications through shopping, merchant tools, and enterprise agents.
Distribution through Taobao and Tmall.
That is why investors were willing to look past the profit collapse. Alibaba is trying to prove it can be more than China’s e-commerce incumbent. It wants to be one of China’s core AI platforms.
Bottom Line: Alibaba traded a quarter of profit for a quarter of AI growth. The 84% EBITA decline was ugly, but the 40% external cloud growth was the signal investors cared about. Eddie Wu is telling the market that margins are secondary to building China’s AI stack. That can work if Cloud growth keeps accelerating and quick commerce losses narrow. But the spending has to translate into durable AI revenue, not just a bigger CapEx bill.
Sea Limited just delivered an impressive Q1, with the top line topping even the Q4 record, despite a quarter typically weaker seasonally.
Revenue grew +47% Y/Y to $7.1 billion, its fastest pace in years, while operating income rose just 30% to $0.6 billion. That gap tells the story: Sea is leaning back into investment mode.
CEO Forrest Li called 2026 a year to “deepen our competitive moats.” Translation: Sea is spending to widen its lead in e-commerce, fintech, and gaming.
The market liked it. The stock jumped as much as 12% after the print, helped by low expectations following a 50% slide from its September high. Investors had grown worried about margin pressure and rising competition across Southeast Asian e-commerce. This quarter showed the trade-off clearly. Growth is accelerating, but profits are being reinvested.
Revenue breakdown:
🛒 Shopee: $5.1 billion (+45% Y/Y).
💳 Monee: $1.2 billion (+58% Y/Y).
🎮 Garena: $697 million (+41% Y/Y).
Margins moved the other way:
Gross margin fell to 44%, down 2 points.
Operating margin fell to 8%, down 1 point.
Shopee adjusted EBITDA fell 16% despite record GMV.
Management reiterated Shopee GMV growth of ~25% Y/Y, with Shopee’s full-year adjusted EBITDA expected to at least match 2025 in absolute dollar terms.
Shopee remains Sea’s engine and burden.
GMV reached a record $37.3 billion, up 30% Y/Y, while gross orders rose 29% to 4.0 billion. Core marketplace revenue, including transaction fees and advertising, surged 61% to $3.8 billion.
That’s the good news: Shopee’s take rate is improving.
The bad news: cost of revenue rose 55% as Sea poured money into logistics and instant delivery. Shopee’s adjusted EBITDA fell to $223 million from $264 million a year ago.
This is the Amazon playbook we are all familiar with. Sacrifice near-term margin to build infrastructure that competitors struggle to match. TikTok Shop and Temu can compete on price. But a regional fulfillment network is harder to replicate.
Management still targets a long-term 2%-3% e-commerce EBITDA margin. For now, Sea appears willing to let margins compress if it means strengthening Shopee’s logistics moat.
Monee, formerly SeaMoney, is no longer a side hustle.
The loan book jumped 71% to $9.9 billion, the main driver of revenue growth for this segment. Non-performing loans past 90 days remained flat at 1.1%, a reassuring sign for now.
That matters because Monee has better unit economics than e-commerce, but also more downside if credit quality cracks. Sea is increasingly a marketplace, a gaming company, and a lender, all in one.
The opportunity is powerful. Shopee gives Sea transaction data that most banks never see. That can improve underwriting and deepen customer relationships. But the credit cycle has not been fully tested at this scale.
Garena delivered its best quarter since 2021. Bookings grew 20% Y/Y to $931 million, and adjusted EBITDA rose 25% to $574 million. Bookings represent the money spent by users during the quarter, which is recognized into revenue over time. It’s the representation of the business momentum.
The surprise is that Garena is not growing by adding many new users. Quarterly active users were roughly flat at 667 million. Instead, paying users grew 12%, and average bookings per user increased.
In plain English: the funnel is mature, but monetization is improving.
Free Fire remains the workhorse, supported by strong live events and partnerships. Garena was once written off as a fading one-hit business. Now it is back to doing what it did during Sea’s first growth wave: generating the cash that funds everything else.
Sea is becoming a three-engine compounder:
Shopee is building the logistics moat.
Monee is monetizing the user base through credit.
Garena is funding the reinvestment cycle.
The bull case is that these three engines reinforce each other. Shopee acquires the users, Monee deepens monetization, and Garena provides high-margin cash flow.
The bear case is just as clear: TikTok Shop, Lazada, and Temu are not going away. Credit risk and logistics costs could pressure margins for longer than investors expect.
Bottom Line: Sea is buying growth again, but this time from a stronger position. Q1 delivered record revenue, record GMV, record adjusted EBITDA, and a cleaner three-engine story than Sea has had since 2021. The next test is whether Shopee’s logistics spend turns into operating leverage and whether Monee’s fast-growing loan book holds up at scale. For now, Sea is choosing moat over margin. That can be a winning strategy, but only if the moat hardens before the bill gets too large.
📊 Stay tuned for our PRO coverage tomorrow, including Tencent, Cisco, Nubank, Figma, and more
That’s it for today!
Stay healthy and invest on!
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Disclosure: I own BABA, NU, SE, and TCEHY in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-05-12 20:01:49
Welcome to the Premium edition of How They Make Money.
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The market is punishing tech companies that can’t tell a grand AI story. Few examples are clearer than Sony and Nintendo, the world’s two top console makers, which reported earnings last Friday.
Sony’s stock is down 23% YTD. Nintendo is down ~50% over the past 12 months. Both are facing a memory crunch driven by AI demand for data centers. Both are raising console prices to defend margins.
Meanwhile, Alphabet, Amazon, Meta, and Microsoft can announce $100+ billion CapEx plans and watch investors come back after a brief selloff. Spending on AI infrastructure is treated as an expanding moat. Higher memory costs for consoles are just margin pressure with no upside.
That’s the strange setup for gaming in 2026.
Sony tried on the AI vocabulary this quarter, with physical AI and creator tools. Nintendo stayed quiet and focused on shipping games.
Both companies are executing well in their own ways.
But both are being valued like they’re missing the only story that matters.
Today at a glance:
🎮 Sony: Beyond PlayStation
🍄 Nintendo: The Price Test
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Sony just had its most profitable year ever. But the market focused on what comes next.
FY25 revenue (ending in March 2026) grew 4% Y/Y to ¥12.48 trillion (~$80 billion), while operating income rose 13% Y/Y to ¥1.45 trillion. Yet the March quarter was messy: net profit fell 63% Y/Y to ¥83 billion, far below consensus, dragged down by impairments at Bungie and Pixomondo plus a loss tied to the wound-down Honda EV venture.
The headline miss was ugly, but the underlying story is more interesting.
Sony is becoming a cleaner company: less hardware-heavy, more IP-driven, and more disciplined with capital. The new roadmap is built around gaming services, music catalogs, image sensors, and fab-light manufacturing.
The PS5 sold 1.5 million units in Q4, down from 2.8 million a year ago and the lowest quarter on record for the console. Lifetime shipments reached 93.7 million.
As a result, the revenue for the largest segment of the company was flat Y/Y. That sounds alarming, but the PlayStation business is healthier than the hardware numbers suggest.
Game & Network Services (G&NS) segment operating income fell 42% Y/Y to ¥54 billion in Q4, mainly because Sony booked an ¥88.6 billion Bungie impairment. The write-down reflects weaker future cash-flow expectations after softer engagement in Destiny 2 and delays around Marathon. Sony paid $3.6 billion for Bungie in 2022, making this a costly reminder that live-service games are harder to scale than they look. Strip out one-time charges, and full-year G&NS operating income would have grown 45% Y/Y instead of the reported 12%.
The gaming shift is clear:
Hardware is slowing.
Engagement is holding up.
Software and services are carrying more weight.
PSN monthly active users reached 125 million, up only 1% Y/Y, but still near record levels. Playtime grew along with the user base.
That is the key takeaway. Sony may sell fewer consoles late in the cycle, but the installed base remains deeply engaged. At this stage of the cycle, software it the profit center, while hardware is more of a distribution channel.
The FY26 guide confirms it: G&NS revenue is expected to decline 6% Y/Y, while operating income is expected to grow 30% Y/Y as the Bungie impairment rolls off. Hardware profitability is expected to be roughly flat. The growth comes from software, services, and lower costs.
2026-05-09 22:02:32
Welcome to the Saturday PRO edition of How They Make Money.
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📊 Monthly reports: 200+ companies visualized.
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Today at a glance:
↗️ AMD: CPU Reawakening
📱 Arm: AGI CPU Demand Doubles
🌐 Arista Networks: Demand Beats Supply
🍟 McDonald’s: Value Plays Through Anxiety
🛍️ Shopify: Growth Deceleration Ahead
📱 AppLovin: Axon Opens to the World
🚖 Uber: Bookings Accelerate
🇩🇰 Novo Nordisk: Oral Wegovy Boost
💉 Pfizer: Defining Period
🏨 Marriott: US Demand Reaccelerates
☁️ Cloudflare: Shrinking To Grow Faster
🤝 MercadoLibre: Growth Over Margins
🛖 Airbnb: Guidance Goes Higher
🥡 DoorDash: Demand Offsets the Misses
☁️ CoreWeave: Backlog Near $100B
🏎️ Ferrari: Scarcity Holds Up
🔒 Fortinet: AI-Era Demand Surge
📈 Coinbase: Crypto Winter Continues
🐶 Datadog: AI Becomes the Engine
💳 PayPal: Lores Lays Out the Cuts
🔲 Block: AI Bet Pays Off
🎤 Live Nation: Antitrust Bill Lands
🇰🇷 Coupang: Recovery Takes Time
💳 Fiserv: Transformation Strain
⚡️ Axon: AI and Counter-Drone Inflection
👽 Reddit: Profitability Tier Unlocked
✈️ Expedia: B2B Carries The Load Again
💬 Twilio: Voice AI Reaccelerates
🌭 Kraft Heinz: Early Traction
🌈 Affirm: Card Engine Keeps Roaring
🌎 Global Payments: Worldpay Era Begins
🏈 Flutter: Howe Out, Predictions In
🍞 Toast: Agentic Platform Hits Stride
🍔 RBI: Burger King's Inflection
📢 HubSpot: Another Pricing Pivot
🌊 DigitalOcean: AI Capacity Surge
👻 Snap: Restructure & Reset
🏠 Zillow: Profit Outlook Spooks Street
🗞️ NYT: Ad Engine Reaccelerates
👑 DraftKings: Predictions Push Goes Live
🧬 Tempus AI: Pharma Brings Visibility
🔥 Match Group: Tinder Rebounds
⚡️ Celsius: Portfolio Plays the Hits
📺 The Trade Desk: Guide Disappoints Again
🚲 Peloton: Turnaround Finds Its Footing
🏴 Klaviyo: Agents Find Leverage
🍿 AMC: Box Office Leverage
AMD’s Q1 revenue rose 38% Y/Y to $10.3 billion ($0.3 billion beat), and non-GAAP EPS was $1.37 ($0.08 beat).
Data Center revenue surged 57% Y/Y to $5.8 billion, ahead of expectations, as EPYC CPUs and Instinct GPUs became the primary growth engine. Free cash flow more than tripled to a record $2.6 billion, showing the AI ramp is already flowing through the model.
The biggest shift was not just GPUs. AMD doubled its server CPU market outlook, now expecting the TAM to grow at a 35%+ annual rate to more than $120 billion by 2030, up from its prior 18% CAGR view. The logic is simple: inference and agentic AI require more CPU compute for orchestration, data movement, parallel execution, and head nodes for accelerators. AMD now expects server CPU revenue to grow more than 70% Y/Y in Q2, with robust growth continuing into the second half and 2027.
The accelerator story also strengthened. AMD said that MI450 and Helios customer forecasts now exceed initial expectations, with production shipments still on track to ramp in the second half. The company pointed to multi-generation partnerships with Meta and OpenAI, plus additional large-scale customer interest, as evidence it can generate tens of billions in annual data center AI revenue in 2027. That matters because AMD is no longer pitching itself as a distant NVIDIA alternative. It’s trying to become the second strategic AI platform for hyperscalers that need more supply and leverage.
Outside Data Center, the picture was less explosive. Client and Gaming revenue rose 23% Y/Y to $3.6 billion, with Client up 26% and Gaming up 11%. Ryzen demand remains strong, especially in commercial PCs, but management warned that higher memory and component costs could pressure second-half PC and gaming demand. Embedded returned to growth, up 6% Y/Y to $873 million, helped by test, aerospace, defense, communications, and broader x86 adoption.
Management guided Q2 revenue to $11.2 billion (a massive $0.7 billion beat at the midpoint), implying 46% Y/Y growth, with adjusted gross margin expected to improve to 56%. The setup is increasingly about execution under constraint: securing enough wafers, back-end capacity, memory, and data center power to meet demand. The next test is whether AMD can turn MI450 and Helios into large-scale 2027 deployments while keeping gross margins in the 55%–58% long-term range.
Arm Q4 FY26 (March quarter) revenue rose 20% Y/Y to $1.5 billion ($20 million beat), and non-GAAP EPS was $0.60 ($0.02 beat).
Licensing surged 29% to $819 million, $43 million ahead of consensus.
Royalties grew just 11% to $671 million — a $22 million miss as memory chip shortages weighed on smartphone production.
ACV (Annualized contract value), a metric for normalized license and other revenue, rose 22% Y/Y to $1.7 billion.
Shares fell over 10% as the smartphone slowdown overshadowed AI data center momentum.
The headline story is the Arm AGI CPU, Arm’s first homegrown data center chip and a direct competitive shift against its own customers. Demand more than doubled to over $2 billion across FY27 and FY28, but Arm held its revenue forecast at $1 billion citing TSMC advanced-node wafer constraints. Meta is the lead partner and co-developer. Data center royalty revenue more than doubled Y/Y, with Neoverse CSS holding ~50% market share among top hyperscalers.
CEO Rene Haas saw smartphone unit growth “flip to negative,” though the weakness was concentrated in low-end phones where Arm earns lower royalty rates. The cost of building chips directly is showing up in margins: operating margin fell to 29% from 33% a year ago.
For Q1 FY27, Arm guided revenue to ~$1.26 billion (vs. $1.25 billion consensus) and non-GAAP EPS of ~$0.40 (vs. $0.36 consensus), with both royalty and licensing growing ~20%. Long-term FY31 targets remain intact at $25 billion revenue ($15 billion from AGI CPU, $10 billion from IP) and $9+ EPS. The next quarter test is whether royalty growth reaccelerates as the smartphone memory squeeze eases, and whether TSMC capacity loosens enough to let Arm convert the full $2 billion in AGI CPU demand into revenue rather than the $1 billion currently guided.
2026-05-08 22:03:38
Welcome to the Free edition of How They Make Money.
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Comcast called it “Legendary February.” For 17 days, the Winter Olympics, Super Bowl, and NBA All-Star Game all aired across NBCUniversal, generating over $2 billion of incremental revenue.
Disney got its own Super Bowl boost on ABC. Paramount leaned on the NFL and UFC. Roku benefited as tentpole events pulled more ad dollars into connected TV.
The takeaway from media earnings is clear: live sports are one of the few remaining forces powerful enough to reshape an entire quarter.
But the same quarter also showed the trade-off. Comcast’s Media EBITDA swung to a $426 million loss as NBA rights hit the P&L. Disney’s Sports operating income fell 5%. Warner, having walked away from the NBA, saw linear ad revenue dropped 8%.
The bill for being in sports keeps rising. The bill for sitting out may be even higher.
Today at a glance:
🏰 Disney: Streaming Finally Scales
🦚 Comcast: The Sports Bill Arrives
🎥 Warner: Paramount’s Inheritance
⛰️ Paramount: The Easy Part Is Over
📺 Roku: The CTV Toll Booth
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Disney’s fiscal year ends in September, so the March quarter was Q2 FY26.
📸 Big picture: Revenue rose +7% Y/Y to $25.2 billion ($0.3 billlion beat), and adjusted EPS grew +8% to $1.57 ($0.07 beat) in new CEO Josh D’Amaro’s first quarter at the helm. Total segment operating income rose +4% to $4.6 billion, with all three segments beating expectations. Disney also guided FY26 adjusted EPS growth to ~12% and raised its buyback target to at least $8 billion.
📈 Streaming hits double-digit margins: DTC profitability inflected meaningfully. Disney+/Hulu profits jumped +88% Y/Y to $582 million on subscriber growth, January’s price hike, and ad improvements — delivering Disney’s first-ever double-digit DTC margin. Disney has also stopped reporting subscriber counts, mirroring Netflix’s playbook.
🍿 Entertainment swings up: Entertainment revenue grew +10% Y/Y, helped by the Fubo transaction and a stronger film slate. Avatar: Fire and Ash, Zootopia 2, and Pixar’s Hoppers have generated more than $3.7 billion combined at the global box office. Streaming now generates more than 2x the revenue of linear at Disney Entertainment.
🏰 Experiences keep cruising: Experiences revenue rose +7% to $9.0 billion, with operating income up +5% to $2.6 billion. Cruise capacity remains the growth engine, with the fleet set to expand from 8 to 13 ships by 2031. Domestic park attendance dipped -1% on softer international visitation, but global attendance grew +2%, and per-guest spending rose.
🏈 Sports stuck in transition: Sports revenue grew just +2%, while ESPN operating income fell -5% to $652 million on lower ad revenue and higher rights costs. Q3 sports operating income is guided to fall -14% on rights timing. CFO Hugh Johnston also shut down the linear-spinoff debate, calling it “highly complex” and unlikely to create value.
🤖 D’Amaro’s vision: In a 3,000-word shareholder letter, D’Amaro positioned Disney+ as the company’s “digital centerpiece” — a single hub for streaming, games, parks bookings, and merchandise. AI is also being deployed for ad targeting and labor forecasting at the parks.
Bottom Line: D’Amaro inherited a better setup than Iger did, and his first move gives Disney a strategy investors can finally model: Disney+ as the front door to streaming, sports, games, parks, and commerce. ESPN and parks remain pressure points, but the quarter made the bull case cleaner.
📸 Big picture: Revenue rose +5% Y/Y to $31.5 billion ($1.1 billion beat), or +11% pro forma post-Versant. Adjusted EPS fell -27.5% to $0.79 ($0.06 beat), and adjusted EBITDA declined -9% to $7.9 billion as NBA rights costs hit the P&L for the first time.
📉 Broadband losses moderate: Comcast lost only 65,000 domestic broadband customers, far better than the ~170,000 analysts feared and the first Y/Y improvement since Q4 2020. The catch: domestic broadband revenue still fell 5% to $6.3 billion as $45/month price guarantees and free wireless bundles compress ARPU.
📱 Wireless sets a record: Xfinity Mobile posted its best net additions quarter ever, with domestic wireless service revenue up +15% to $977 million. The real test arrives in 2H 2026, when bundled free lines hit their one-year mark and convert to paid. Early cohorts are seeing “a significant majority” roll over.
🦚 Peacock breaks $2 billion: Peacock added 5 million paid subscribers to reach 46 million, with revenue up +71% Y/Y to $2.1 billion. EBITDA losses widened to $432 million on NBA costs, but management called Q1 the “peak dilution” and guided Peacock to “approach profitability” in Q2.
🎢 Epic Universe keeps printing: Theme parks revenue jumped +24% to $2.3 billion, with EBITDA up +33% to $551 million, fueled by Epic Universe’s first full year in Orlando. International parks softened, but US parks show no concerning pullback.
📺 ‘Legendary February’ comes at a cost: The 17-day Olympics/Super Bowl/NBA All-Star stretch generated $2.2 billion in advertising alone, more than doubling Media ad revenue. Yet Media EBITDA still swung to a $426 million loss as NBA costs hit the segment.
Bottom line: Comcast’s pivot is working, but the trade-off is visible: lower broadband ARPU today in exchange for better retention and a larger wireless base tomorrow. If free lines convert to paid in 2H, the strategy starts to compound. If not, Comcast just bought stability at a steep price.
📸 Big picture: Revenue dipped -1% Y/Y to $8.9 billion ($10 million beat), or -3% in constant currency. GAAP EPS came in at -$1.17 ($1.08 miss), with the $2.9 billion net loss almost entirely driven by the $2.8 billion Netflix termination fee Paramount paid on WBD’s behalf, plus acquisition-related amortization and restructuring. Excluding those items, the results were broadly in line.
🍿 Studios still on a roll: Studios revenue surged +35% Y/Y to $3.1 billion, with adjusted EBITDA up +199% to $775 million. Wuthering Heights anchored the slate, and CEO David Zaslav reaffirmed the goal of at least $3 billion in WB Studios EBITDA for the year. The “Warner Bros.” side is doing exactly what the bull case requires.
📈 Streaming crosses 140 million: HBO Max launched in the UK, Germany, Italy, and Ireland, helping the company “meaningfully exceed” its prior 140 million subscriber target. Streaming revenue rose +9% to $2.9 billion, and EBITDA grew +29% to $438 million. Management now expects to exit 2026 with more than 150 million subscribers globally.
📺 Linear keeps bleeding: Global Linear Networks revenue fell -8% Y/Y to $4.4 billion, with EBITDA down -9% to $1.6 billion. Ad revenue declined -8% in constant currency, with the absence of the NBA accounting for 7 points of the drop. CFO Gunnar Wiedenfels said the company has “long stopped viewing our linear networks as linear networks” — a tacit acknowledgment that the segment is being managed for cash, not growth.
🪧 The deal is almost done: WBD shareholders approved Paramount Skydance’s $31/share cash offer in April. Closing remains targeted for the end of Q3, pending foreign regulatory approval. WBD ended the quarter with $30.1 billion in net debt, or 3.4x leverage — Paramount’s inheritance.
Bottom Line: WBD’s quarter was good enough underneath the accounting noise, but the stock is no longer trading on operations. With Paramount’s offer locked in, investors are effectively underwriting deal timing, regulatory risk, and the ticking-fee sweetener. The operational story is real, but the trade is no longer about WBD.
📸 Big picture: Revenue rose +2% Y/Y to $7.4 billion ($70 million beat) in Paramount Skydance’s second quarter under new ownership. Adjusted EPS came in at $0.23, down from $0.29 a year ago, while adjusted EBITDA jumped +59% to $1.2 billion. The company reaffirmed its 2026 outlook of $30 billion in revenue and $3.8 billion in adjusted EBITDA.
📉 TV Media keeps sliding: Linear remains the drag, with TV Media revenue down -6% Y/Y to $3.7 billion, better than the -9.5% Wall Street feared. Affiliate and ad revenue both declined, though total advertising improved versus Q4, and management expects ad growth to return in 2H 2026.
📈 Streaming holds up: Direct-to-Consumer revenue grew +11% Y/Y to $2.4 billion, with Paramount+ revenue up +17% to $2.0 billion on a +14% ARPU lift from January’s price hike. Paramount+ ended with 79.6 million subscribers after exiting low-value international hard-bundle subs, and management expects near-term subs to stay “flattish” as more bundles roll off.
🎬 Studio finds its footing: Filmed Entertainment revenue grew +11% to $1.3 billion, anchored by Scream 7 — now the highest-grossing entry in the franchise’s history. Ellison reaffirmed the target of 30 theatrical films per year, with 15 on the 2026 calendar. Landman also became the most-watched series in Paramount+ history.
♟️ WBD closing in Q3: Paramount drew $2.2 billion on its credit facility to help pay Netflix’s $2.8 billion breakup fee, ending Q1 with $1.9 billion in cash and $15.5 billion in gross debt. The $110 billion WBD deal cleared a shareholder vote in April and remains targeted to close by the end of Q3, pending regulatory approval.
Bottom Line: Ellison’s team delivered the kind of clean quarter Paramount needed before taking on WBD. But this was the easy part: cost cuts, better execution, and a cleaner streaming story are only the opening act. The real test begins when Paramount inherits WBD’s debt, linear decline, and integration complexity.
📸 Big picture: Revenue grew +22% Y/Y to $1.25 billion ($50 million beat), and EPS swung to a $0.57 profit ($0.24 beat) versus a $0.19 loss a year ago. Adjusted EBITDA jumped +165% to $148 million, and free cash flow hit $148 million — the second-highest on record.
📈 Platform accelerates: Platform revenue grew +28% Y/Y to $1.1 billion, lifted by the Olympics and Super Bowl. For the first time, Roku broke out Platform into two segments: Advertising revenue grew +27% to $613 million, while Subscriptions grew +30% to $519 million. Roku said its video ad growth outpaced both the broader US CTV and digital ad markets.
📉 Devices stay a loss-leader: Devices revenue fell -16% Y/Y to $118 million, with a -16% gross margin on lower player unit sales and promotional pricing. The strategy hasn’t changed: hardware exists to seed the platform.
📊 100 million households: Roku passed 100 million streaming households globally, with its devices used by more than half of all US broadband households. Streaming hours rose +8% Y/Y to 38.7 billion, and Q1 was Roku’s best quarter ever for new Premium Subscription sign-ups.
🔮 Guidance raised again: Roku lifted full-year Platform revenue guidance to ~+21%, raised adjusted EBITDA to $675 million, and reiterated the path to $1 billion in free cash flow by 2028 “if not sooner.” Q2 guidance calls for Platform revenue growth of +20% Y/Y.
Bottom Line: Roku doesn’t need to own sports rights to benefit from them. As tentpole events pull more ad dollars into connected TV, Roku acts like a toll booth on the shift. The H2 caution matters, but it sounds more macro than company-specific.
📊 Stay tuned for nearly 50 companies visualized tomorrow in our PRO coverage!
That’s it for today!
Stay healthy and invest on!
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Disclosure: I own AAPL, AMZN, GOOG, NFLX, and ROKU in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-05-05 20:03:31
Welcome to the Premium edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
This week, we’ll visualize more than 50 reports ranging from Airbnb to Zillow.
Today, we break down some of the companies that already reported on what was an unusually busy Monday.
Today at a glance:
🕵️ Palantir: Tokens Are the New Coal
🦉 Duolingo: Top of Funnel Goes Flat
🛵 Grab: The Indonesia Overhang
📌 Pinterest: Buyback for the Ages
Palantir’s US business doubled in twelve months, and CEO Alex Karp says the company cannot meet demand.
CTO Shyam Sankar gave the framing of the quarter:
“Tokens are the new coal; AIP is the train.”
Inference costs are collapsing. GPT-4-equivalent performance is now roughly 1,000x cheaper than three years ago. As a result, the universe of agent workflows that make economic sense is expanding fast. That’s Jevons paradox. But it also comes with the risk of unreliable model output.
Now, Palantir’s AIP (Artificial Intelligence Platform) and the underlying ontology are the harness that makes raw model output safe enough to put into production. Every agent action is governed, attributed, and traceable. In short, the more abundant cheap tokens become, the more valuable the layer that turns them into deployable work.
Q1 revenue grew 85% Y/Y to $1.63 billion ($90 million beat), Palantir’s fastest growth as a public company, and the 11th consecutive quarter of acceleration. Adjusted EPS came in at $0.33 ($0.05 beat). The Rule of 40 score hit 145, up from 127 last quarter, putting Palantir in rarefied air alongside NVIDIA, Micron, and SK Hynix.
Net dollar retention jumped to 150% (up from 139% in Q4 FY25), and adjusted free cash flow hit $925 million at a wild 57% margin.
The US now accounts for 79% of total revenue and surged +104% Y/Y.
💼 US Commercial: $595 million (+133% Y/Y, +18% Q/Q).
🪖 US Government: $687 million (+84% Y/Y, +21% Q/Q).
Management noted US Commercial growth would have been +143% Y/Y absent a large customer transitioning from commercial to government. International commercial, by contrast, grew just +26% Y/Y to $179 million — Europe remains the laggard, and Karp’s call commentary made clear he has limited patience for it.
Bookings matter more than revenue at this stage of the curve.
RDV (Remaining Deal Value) is Palantir’s total committed but not yet recognized revenue, indicating the visible runway. RDV nearly doubled to $11.8 billion. US Commercial RDV alone surged 112% Y/Y to $4.92 billion. That’s the cushion under FY26 guidance and the reason management keeps raising its outlook.
FY26 revenue is now expected to grow 71% Y/Y to $7.7 billion (compared to 61% previously). That includes a 120% growth to $3.2 billion for US Commercial.
Bottom Line: Palantir fundamentals have improved so much that even the nosebleed valuation has come down to ~70x forward EBITDA. That’s still high compared to the rest of the market, but not outrageous for a company expected to nearly double free cash flow this year.